PETALING JAYA: Crude palm oil (CPO) price is expected to trade in the RM2,500 to RM2,900 per tonne range this month, as palm oil supplies are expected to get tighter due to weaker-than-expected supply, while demand picks up ahead of Ramadan, according to CIMB Research.
“CPO prices rose to a high of RM2,716 per tonne on Apr 5 due to concerns over weaker-than-expected palm oil supplies and smaller-than-expected soybean crops from Argentina as farmers were hit with the worst flood situation in the soybean belt in more than 30 years.
“This led to harvests delays and a downgrade in soybean crop estimates for Argentina which produces 16% of the global soybean output,” it said in a plantation sector report update yesterday.
Presently, CPO prices have corrected recently to a low of RM2,541 per tonne, before rebounding to close at RM2,616 per tonne, yesterday due partly to the weaker ringgit against US dollar.
In terms of output, CIMB Research said Malaysian CPO output grew by 8% month-on-month (mom) to 1.3 million tonnes in Apr 16 based on findings from a survey of 26 Malaysian planters by the CIMB Futures team.
“The 8% mom rise in output is in line with the historical mom rise in Apr’s palm oil output. However, CPO output fell 22% year-on-year (yoy) due to the El Nino effect and heat wave experienced in Malaysia in March and April.
“Our survey revealed that Sabah estates posted the biggest increase in output of around 13% mom, followed by Sarawak, which registered a 7% mom rise in output, and Peninsular Malaysia, with a 4% mom rise in output,” it said.
Meanwhile, CIMB Research said palm oil exports fell by 6% mom, based on export statistics released by SGS and ITS.
“Palm oil exports to China, India and EU fell by 16% to 25% due to de-stocking activities.
“The weaker April exports could also have been partly due to the spike in exports in March by 22% yoy), ahead of the 5% (or RM125 per tonne) export tax on CPO effective Apr 1,” it said.
The Bureau of Meteorology Australia (BOM) revealed that the El Nino is in its last stages.
Six of the eight international climate models suggest that the tropical Pacific Ocean will return to neutral levels within the next month. BOM also revealed that the likelihood of La Nina forming later in 2016 is around 50%.
“Overall, we estimate that Malaysian palm oil inventories could have fallen 5% mom to a 14-month low of 1.8 million tonnes at end-Apr 16.
The official figures will be released on May 10,” said CIMB Research that maintained a ‘neutral’ rating as the sector is fairly valued and quarter one earnings are likely to be weaker y-o-y.